| Health indicators |
Medical Services Prices
Figure 7: Percent Change in Medical Care and Overall Prices from the Same Period of the Previous Year: 1991-2003
SOURCE: Department of Labor, Bureau of Labor Statistics: Producer Price Indexes; U.S. Department of Commerce, Bureau of Economic Analysis: Gross Domestic Product.
Medical services prices (as measured by the CPI and PPI) rose more than twice as fast as overall prices (as measured by the GDP implicit price deflator) during the third quarter of 2003 when compared to the same period of the previous year. The CPI and PPI for health services rose 4.3 and 4.1 percent respectively, compared with an increase of 1.7 percent in overall prices (Tables 7 and 9).
While both medical services price indexes rose in the third quarter, they grew at slower rates than in previous quarters. The CPI for medical care services, which measures consumers' out-of-pocket expenditures for medical services and health insurance, decelerated 0.2 percentage points in 2003:Q3, the third straight quarter of deceleration after eight quarters of relatively stable growth (Table 9).
The PPI for health services, which measures the growth in prices received by medical service producers from public and private payers, decelerated 0.3 percentage points in 2003:Q3. The 2003:Q3 deceleration followed four quarters of very strong growth (due primarily to a sharp acceleration in the PPI for hospitals during this period).
Note: The difference in the rates of growth between the CPI for medical care services and the PPI for health services reflects the definitional and conceptual differences in the two indexes. First, there are substantial differences in the services and payers captured in the two indexes. For example, the PPI includes price changes from public payers, such as Medicare and Medicaid, while the CPI includes only price changes associated with out-of-pocket and private health insurance payments. In addition, the PPI includes prices for home health services while the CPI does not, and the CPI includes prices for dental and eye care services that the PPI does not. Second, the PPI captures transaction prices while the CPI in some cases is measuring changes in list (undiscounted) prices. Finally, the PPI attempts to measure prices selected from a sample of all providers while the CPI selected is measuring prices for all urban consumers.
Hospital Prices
Figure 8: Percent Change from the Same Period of the Previous Year in CPI Hospital Prices by Type of Service: 1998-2003
SOURCE: U.S. Department of Labor, Bureau of Labor Statistics: CPI Detailed Report.
Hospital prices, as measured by the CPI, increased 7.3 percent in 2003:Q3, after increasing 7.1 percent in 2003:Q2 (Table 9). This follows four quarters of growth in the 9 percent range.
Prices for outpatient services continued to increase at a faster rate than those for inpatient services. In 2003:Q3, prices for outpatient services increased 8.8 percent, compared with an increase of 6.7 percent for inpatient services. Both increases, however, represent significant slowdowns from growth seen in 2002 and early 2003.
Figure 9: Percent Change in Hospital Prices from the Same Period of the Previous Year: 1998-2003
SOURCE: U.S. Department of Labor, Bureau of Labor Statistics: CPI Detailed Report; U.S. Department of Labor, Bureau of Labor Statistics: Producer Price Indexes; CMS, Office of the Actuary
Like the CPI, the PPI for hospitals also exhibited strong growth in late 2002 and 2003. The PPI for general medical and surgical hospitals increased 5.7 percent in 2003:Q3, following increases of 4.9, 5.7, and 6.3 percent in the previous three quarters (Table 9).
Input prices, however, continued to grow at a rather moderate pace. Input prices, as measured by the CMS input price index for hospitals, increased 3.9 percent in 2003:Q3, compared with increases of 3.8 percent in both 2003:Q1 and Q2.3
Nursing Home Prices
Figure 10: Percent Change in Nursing Home Prices from the Same Period of the Previous Year: 1998-2003
SOURCE: U.S. Department of Labor, Bureau of Labor Statistics: CPI Detailed Report; U.S. Department of Labor, Bureau of Labor Statistics: Producer Price Indexes; CMS, Office of the Actuary.
Nursing home prices, as measured by the CPI, increased 5.6 percent in 2003:Q3 (Table 9), compared with an increase of 5.8 percent in 2003:Q2. The 2003:Q3 increase marked the seventh straight quarter that the index grew in the 4.5-6.0 percent range.
Nursing home prices, as measured by the PPI, grew 2.9 percent in 2003:Q3, after virtually identical increases the previous two quarters. Nursing homes experienced decelerating growth in the prices that they received for their services during the first half of 2001 through the end of 2002. In the first quarter of 2003, a significant acceleration in prices received from private payers more than offset the expiration of two Medicare rate increases in 2002:Q4, resulting in a slight acceleration in the aggregate PPI for the industry. The strong increase in prices received from private payers has continued into 2003:Q3.
Input prices, as measured by the CMS input price index for skilled nursing facilities, increased 3.3 percent in 2003:Q3, virtually identical to their increase the previous four quarters.4
Home Health Care Prices
Figure 11: Percent Change in Home Health Prices from the Same Period of the Previous Year: 1998-2003
SOURCE: U.S. Department of Labor, Bureau of Labor Statistics: Producer Price Indexes; CMS, Office of the Actuary.
Home health care prices, as measured by the PPI, decreased 1.1 percent in 2003:Q3, after decreasing 0.5 percent in 2003:Q2 (Table 9). The decline in the aggregate home health care PPI is more than accounted for by a decline in the PPI for Medicare payers, which reflects (1) application of a 4.9-percent cut in home health payments legislated by Congress and (2) the expiration of a 5-percent add-on to payments to rural home health care providers (both of which took effect on October 1, 2002).
Growth in input prices, as measured by the CMS input price index for home health, decelerated slightly in 2003:Q3 (from 3.3 percent in 2003:Q2 to 3.2 percent in 2003:Q3), largely due to a deceleration in the price of compensation.5
3As noted previously, the CMS input price index for hospitals can now be found at www.cms.hhs.gov/statistics/market-basket.
4As noted previously, the CMS input price index for skilled nursing facilities can now be found at www.cms.hhs.gov/statistics/market-basket.
5As noted previously, the CMS input price index for home health care agencies can now be found at www.cms.hhs.gov/statistics/market-basket.
